Concern for SMEs over Labour proposal to scrap tribunal fees

Worries have arisen that small businesses may have to face more claims should Labour’s plan to abolish employment tribunal fees come to fruition.

Commenting on Labour Party’s proposal to abolish employment tribunal fees, Paul Quain, partner at specialist firm GQ Employment Law says, ‘For small businesses the cost of defending a claim is often completely disproportionate to the value of the claim itself. In some cases this means handing payouts where they are not deserved.’

Quain’s firm says that the number of employment tribunal cases has dropped by 70 per cent since the fee was introduced, from 153,000 (2013/14) to 52,000 (2014/15).

‘Although the introduction of the fees is not the sole driver for the drop in the number of employment tribunal cases, scrapping the fee system is likely to lead to a large jump in claims,’ he continues.

Employment tribunal fees for claimants start at about £160, rising to £250, with a further hearing fee ranging from £230 to £950.

Quain says that employers often face significant legal fees when defending themselves against disgruntled former employees no matter how weak the claim is, and that under the current system employers are not usually able to reclaim the cost of defending against an unsuccessful tribunal claim.

‘Equally, however, there appear to be a significant number of strong claims which employees have, but which they are not bringing because they now have to pay to do so. Getting the balance right is always a difficult task for any political party,’ he adds.

‘Small businesses probably have the most to lose. They need to be aware of the formalities required when dismissing an employee so that they don’t leave themselves open to attack. Things like paying backdated holiday pay and unpaid wages need to be addressed or they could face potentially expensive claims.’

Duncan Cheatle, founder of Prelude Group and The Supper Club, feels strongly about the burden that unnecessary tribunals places on small firms and has previously called for a cap on compensation in employment tribunal cases.

He says, ‘Vexatious claims are an enormous headache for small firms and rarely benefit anyone apart from the lawyers. We’ve seen before that fees reduce the number of claims made, so it is concerning that Labour would scrap them completely.

‘Instead, we should be looking at clear guidelines to ensure fair claims can be made without the unnecessary burden on business.’

Products

How small and medium businesses can take on flexible working

Some 57 per cent of employees say the availability of flexible working in their workplace is important to them, according to Sage data. This guide to Sage 200 Online shows why more and more businesses are turning to the cloud.